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Hiding Assets from the Trustee in Bankruptcy - There should be no Hiding Place!

In my recent article with respect to individuals applying for bankruptcy online, dated 4 April 2016, I reported that the Insolvency Service must be vigilant with respect to abuse. In particular, it is a debtor’s duty is to provide the Official Receiver or Trustee with details of all known assets. Failing to do this is an offence, under Section 354(1) of the Insolvency Act 1986 (IA 1986).

In my experience it is not infrequent that some debtors offer limited information about their assets and circumstances to the Official Receiver or Trustee, at best stating half- truths, or at worst disclosing nothing at all.

Below are three examples of where debtors unsuccessfully tried to hide assets leading to criminal proceedings.

Mr Jonathan Weal

Mr Weal, a former banker and businessman, was declared bankrupt in 2012. He informed the Official Receiver of a number of items he owned which were of low or no value, such as a broken watch, a 10-year old computer and his underpants, together with some second-hand furniture. Asked to clarify details of the furniture Mr Weal said that “there was nothing of exceptional value”.

However, Mr Weal was caught out when he appeared on television expressing his delight about a painting of a seafaring scene which was on the brink of being verified as a work by “Turner” – possibly valued at £20 million.

Unfortunately for Mr Weal, his Insolvency Service examiner, Mrs Choy Mooi, was at home watching that TV broadcast, which was the first time she had heard of his art collection. In follow-up interviews with Mrs Mooi, Mr Weal claimed the paintings were included under the category of “furniture”, which he declared on his bankruptcy questionnaire form.

In June 2015, Mr Weal was found guilty of two charges of non-disclosure of property. The judge, Recorder Benedict Kelleher, said “He could only sentence on the basis that the art works were worth £6,500 because experts had not confirmed the painting as a Turner.”

Mr Weal was ordered to undertake 120 hours of unpaid work during a one-year community order and to pay £1,000 costs.

Ms Suzanne Majury

Ms Majury was declared bankrupt on 19 October 2012 after previously having transferred a residential property to her future husband for no consideration. She married him 10 months later. This fact was concealed from the Official Receiver.

In December 2015 she was sentenced to 8 months imprisonment suspended for 24 months, with costs of £1,000.

Mr Mukhtar Singh

On 20 January 2010, nine months before he was made bankrupt, Mr Singh removed his interest in a property by transferring it to his wife. During the course of the bankruptcy it transpired that:

He did not mention the transferred property to the Official Receiver

He failed to mention he had an interest in another property adjoining the one he transferred to his wife

He lied about his knowledge of a court judgment made against him, even though this was the judgment that led to his bankruptcy

In July 2014 Mr Singh was sentenced to 12 months imprisonment, suspended for two years.

What can be done?

In my opinion, the Insolvency Service must make a clear note on the bankruptcy application form that the Official Receiver or the Trustee in Bankruptcy will be vigilant to any attempt by a debtor to withhold important information. This includes lying about owning assets, transferring assets into someone else’s name or giving them to a third party to hold, and creating fake liens or mortgages to make the asset appear valueless. Obviously the criminal consequences of default must be stressed.

Compare jurisdictions: Restructuring & Insolvency

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